April 20, 2016
The Markets
Isn’t it remarkable that
China’s growth is so consistent?
A columnist from The Washington Post once opined that
China “produces an astonishing number of astonishing numbers.” Last week’s GDP
announcement, which helped push markets higher, may fall into that category.
China’s official statistics
agency reported the country’s gross domestic product (GDP) grew by 6.7 percent
during the first quarter of 2016. That didn’t come as a big surprise because
it’s smack-dab-in-the-middle of the official Chinese government target of 6.5
to 7.0 percent GDP growth. The target was set last year when the government
adopted its most recent five-year plan.
Not everyone thinks China’s
official statistics are on the money. The
Conference Board (TCB), an
independent global research association, has found:
“…an
upward bias in the previously published GDP growth series of, on average, 2.6
percentage points per year since the start of Deng Xiaoping’s so-called “reform
era” that began in 1978, this percentage has not been constant over time. In
fact, our alternative series indicates much larger volatility in the
year-on-year estimates (sometimes even showing faster growth rates than the
official estimates), suggesting that the impacts of external and internal
shocks on the Chinese economy are much more pronounced than the official
statistics convey.”
In other words, China’s
growth may not be as steadfast and unwavering as the country’s government would
have us believe.
TCB
estimated China’s GDP grew by 3.7 percent during 2015, which was significantly
lower than the Chinese government’s 6.9 percent growth estimate. In fact, TCB expects the Chinese economy to grow
by 3.7 percent in 2016, too. It’s not 6.5 percent, but it’s solid growth.
Data as of 4/15/16
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard &
Poor's 500 (Domestic Stocks)
|
1.6%
|
1.8%
|
-1.2%
|
10.3%
|
9.5%
|
4.9%
|
|
Dow Jones Global
ex-U.S.
|
3.3
|
0.7
|
-13.0
|
-0.6
|
-1.6
|
-0.3
|
|
10-year Treasury
Note (Yield Only)
|
1.8
|
NA
|
1.9
|
1.7
|
3.4
|
5.0
|
|
Gold (per ounce)
|
-1.0
|
15.5
|
2.9
|
-4.2
|
-3.6
|
7.2
|
|
Bloomberg Commodity Index
|
1.7
|
2.3
|
-20.8
|
-14.8
|
-14.0
|
-7.4
|
|
DJ Equity All REIT Total Return Index
|
0.2
|
6.0
|
7.2
|
9.1
|
11.4
|
7.2
|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg
Commodity Index returns exclude reinvested dividends (gold does not pay a
dividend) and the three-, five-, and 10-year returns are annualized; the DJ
Equity All REIT Total Return Index does include reinvested dividends and the
three-, five-, and 10-year returns are annualized; and the 10-year Treasury
Note is simply the yield at the close of the day on each of the historical time
periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com,
London Bullion Market Association.
Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not
applicable.
what do
economists think? As they’ve traveled
across the country, U.S. Presidential candidates have made a variety of
economic proposals and promises. National
Public Radio’s Planet Money asked 22 economists from across the political
spectrum for their two cents on the matter. Survey participants were given
three options: good, debatable, or bad. Here are their opinions:
- End the
“carried interest” tax break, which benefits hedge fund managers and
private equity executives.
- Good:
20
- Debatable:
2
- Bad: 0
- Lower
the corporate tax rate to 25 percent.
- Good:
10
- Debatable:
10
- Bad: 2
- Create a
“National Infrastructure Bank” seeded with public money to help finance
infrastructure projects.
- Good:
10
- Debatable:
8
- Bad: 4
- Make
tuition free at public colleges and universities.
- Good: 1
- Debatable:
1
- Bad: 20
- Make
tuition free at community colleges for students who contribute earnings
from working 10 hours a week.
- Good: 5
- Debatable:
9
- Bad: 8
- Impose a
“spectator tax.” Stock trades will be taxed at 0.5 percent and bonds at
0.1 percent.
- Good: 4
- Debatable:
6
- Bad: 12
- Raise
the federal minimum wage to $15 an hour.
- Good: 2
- Debatable:
4
- Bad: 16
- Remove
single taxpayers who earn less than $25,000, and married taxpayers (and
those filing jointly) who earn less than $50,000 – approximately over 50
percent – from the tax rolls.
- Good: 2
- Debatable:
9
- Bad: 11
- Everyone
pays the same 10 percent tax rate. It retains some version of the earned
income tax credit and deductions for lower-income families.
- Good: 1
- Debatable:
0
- Bad: 21
- Expel
immigrants who are in the United States illegally.
- Good: 0
- Debatable:
0
- Bad: 22
We’ll find out what the American people think later
this year!
Weekly Focus –
Think About It
“And
along the way I discovered that a lot of great originals in history were
procrastinators. Take Leonardo da Vinci. He toiled on and off for 16 years on
the Mona Lisa. He felt like a failure. He wrote as much in his journal. But
some of the diversions he took in optics transformed the way that he modeled light
and made him into a much better painter.”
--Adam Grant,
Organizational psychologist
Best
regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc.,
Member
FINRA/SIPC.
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* This newsletter was
prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with
the named broker/dealer.
* The Standard & Poor's
500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock
market in general. You cannot invest directly in this index.
* The Standard & Poor’s
500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect
fees,
expenses, or sales charges.
Index performance is not indicative of the performance of any investment.
* The 10-year Treasury Note
represents debt owed by the United States Treasury to the public. Since the
U.S.
Government is seen as a
risk-free borrower, investors use the 10-year Treasury Note as a benchmark for
the long-term bond market.
* Gold represents the
afternoon gold price as reported by the London Bullion Market Association.
The gold price is set twice
daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in
U.S. dollars per fine troy ounce.
* The Bloomberg Commodity
Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19
physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT
Total Return Index measures the total return performance of the equity
subcategory of the Real Estate Investment Trust (REIT) industry as calculated
by Dow Jones.
* Yahoo! Finance is the
source for any reference to the performance of an index between two specific
periods.
* Opinions expressed are
subject to change without notice and are not intended as investment advice or
to predict future performance.
* Economic forecasts set
forth may not develop as predicted and there can be no guarantee that
strategies promoted will be successful.
* Past performance does not
guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly
in an index.
* Consult your financial
professional before making any investment decision.
* Stock investing involves
risk including loss of principal.
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Sources:
http://www.economist.com/news/china/21689628-chinas-obsession-gdp-targets-threatens-its-economy-grossly-deceptive-plans (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-18-16_TheEconomist-Grossly_Deceptive_Plans-Footnote_5.pdf)
http://www.npr.org/sections/money/2016/02/26/468298576/economists-on-candidates-proposals-mostly-bad (Numbers correspond
to the dots in right-hand boxes)
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